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Book part
Publication date: 8 November 2019

Alena Kireyeva and Irina Loukianova

Fiscal policy is one of the weighty instruments of state regulation and is intended to ensure the creation of an institutional environment to reach the strategic…

Abstract

Fiscal policy is one of the weighty instruments of state regulation and is intended to ensure the creation of an institutional environment to reach the strategic objectives of sustainable development. This chapter is devoted to the study of the implementation of tax reform in Belarus. It analyzes the place of tax instruments in economic growth and investigates the strategic direction of tax reforms. The actual tax policy in Belarus is determined by the requirements of the national strategy of sustainable development which aims to ensure a stable financial basis for the development of society, economy, and environmental management. The historical and economic conditions of Belarus require an assessment of the local peculiarities of the use of tax instruments, which are now in force in leading countries. Therefore the study of foreign experience is complemented by an analysis of local conditions. Tax policy must ensure and support changes in national economies related to globalization, informatization and digitalization of the modern world, while maintaining the ideas of social justice. As a theoretical and practical tool for improving the quality of the tax system through the modernization of the incentives system, the concept of tax expenditures as a part of the budget process was investigated.

Details

Modeling Economic Growth in Contemporary Belarus
Type: Book
ISBN: 978-1-83867-695-7

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Article
Publication date: 10 September 2021

Henda Kacem and Mohamed Ali Brahim Omri

This paper aims to investigate the question concerning whether tax incentives motivate companies to be socially responsible. This study, specifically, examines the impact…

Abstract

Purpose

This paper aims to investigate the question concerning whether tax incentives motivate companies to be socially responsible. This study, specifically, examines the impact of tax incentives for corporate social responsibility (CSR) on the societal practices of Tunisian companies.

Design/methodology/approach

This study uses multiple regression models to assess the effectiveness of tax incentives for companies to take responsible actions. The study was conducted on 71 Tunisian companies operating in different sectors.

Findings

The results reveal that there is a negative and significant association between tax incentives and CSR practices. Therefore, there is an inefficient use of these types of incentives.

Practical implications

The results of the study have important implications for investors and regulatory basis wishing to enhance CSR by giving tax incentives. Investment in social responsibility may improve the corporate culture and reduce the conflict in companies.

Originality/value

The theoretical contributions relate mainly to the originality of the conceptual model developed, to the literature review and to the theoretical foundations mobilized. In fact, the originality of this research is justified by the scarcity of previous study dealing with the relationship between tax incentives and CSR. Thus, to the best of the authors’ knowledge, this study is one of the first to investigate the impact of tax incentives for CSR on CSR practices.

Details

Journal of Financial Reporting and Accounting, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1985-2517

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Article
Publication date: 1 April 2010

E. van Wyk

Biodiversity conservation tax incentives were inserted into the Income Tax Act 58 of 1962 in terms of the Revenue Laws Amendment Act 60 of 2008 and are now contained in…

Abstract

Biodiversity conservation tax incentives were inserted into the Income Tax Act 58 of 1962 in terms of the Revenue Laws Amendment Act 60 of 2008 and are now contained in section 37C. The objectives of this study were to quantify the maximum potential revenue loss, to National Treasury, as a result of these tax incentives granted to landowners in the Western Cape; to identify and discuss alternative policy instruments to encourage conservation; and to investigate the perceptions of landowners in the Western Cape on the tax and alternative incentives available for conservation. The study found that the maximum tax revenue foregone should amount to a tiny percentage of total estimated revenue income for the 2008/2009 fiscal year, while projected future losses could also be insignificant. Landowners prefer direct financial incentives and exemption from property taxes, and contend that direct assistance with conservation activities would also be beneficial. The use of municipal value in the valuation of land would promote objectiveness and consistency. Finally, only a third of the landowners indicated that tax incentives would encourage them to commit more land for conservation.

Book part
Publication date: 9 December 2020

Zhan Furner, Keith Walker and Jon Durrant

Krull (2004) finds that US multinational corporations (MNCs) increase amounts designated as permanently reinvested earnings (PRE) to maximize reported after-tax earnings…

Abstract

Krull (2004) finds that US multinational corporations (MNCs) increase amounts designated as permanently reinvested earnings (PRE) to maximize reported after-tax earnings and meet earnings targets. We extend this research by examining the relationship between executive equity compensation and the opportunistic use of PRE by US MNCs, and the market reaction to earnings management using PRE designations. Firms use equity compensation to incentivize executives to strive for maximum shareholder wealth. One unintended consequence is that executives may engage in earnings management activities to increase their equity compensation. In this study, we examine whether the equity incentives of management are associated with an increased use of PRE. We predict and find strong evidence that the changes in PRE are positively associated with the portion of top managers' compensation that is tied to stock performance. In addition, we find this relationship to be strongest for firms that meet or beat forecasts, but only with the use of PRE to inflate income, suggesting that equity compensation incentivizes managers to opportunistically use PRE, especially to meet analyst forecasts.

Further, we provide evidence that investors react negatively to beating analysts' forecasts with the use of PRE, suggesting that investors find this behavior opportunistic and not fully convincing. This chapter makes an important contribution to what we know about the joint effects of tax policy, generally accepted accounting principles, and incentive compensation on the earnings reporting process.

Article
Publication date: 9 January 2017

Christian Daude, Hamlet Gutierrez and Angel Melguizo

Tax incentives can be a useful tool to stimulate investment in developing countries. However, interest groups often are able to exert considerable influence in its…

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Abstract

Purpose

Tax incentives can be a useful tool to stimulate investment in developing countries. However, interest groups often are able to exert considerable influence in its management, if not its design. The purpose of this paper is to use a power-based approach to the political economy of tax reform to analyse the case of tax incentives for investment in the Dominican Republic. Based on original interviews and a detailed analysis of regulations, the authors study how interest groups work within the institutional framework to seek outcomes that best fit their objectives. However, when unsuccessful, they become powerful advocates of change. These power dynamics have important implications for the design and management of tax incentives in the Dominican Republic and in other developing economies.

Design/methodology/approach

Case study based on informed interviews with policy makers, lobbyists and researchers combined with statistical and administrative information to test the main hypotheses.

Findings

While the role of influence groups in creating tax schemes has been widely studied, the authors show that these groups can also have an important role in the administration of the regime and making it more or less open to modifications. The paper shows that the capture of investment incentives has rendered the tax system rigid and unstable in the Dominican Republic, subjecting the public interest hostage to the gain of few.

Research limitations/implications

Therefore, there is a need to review and reform tax policy, not just from a technical viewpoint, but more importantly altering the political arrangements. More transparency in assessing the impact of these schemes, disclosing information of who has access to tax exemptions and budgeting the tax expenditures can also be tools to increase public control over these instruments. Also, making it more difficult to grant tax incentives, for example by asking for an ex-ante justification and quantification of the externalities supposedly being created would reduce the abuse by power groups of these instruments. Without more balanced and independent leadership, it would be extremely difficult to advance in these fields.

Originality/value

The literature on the political economy of tax incentives normally focuses on how key actors work around the institutional framework to solve conflict of interests. This paper addresses a complementary – and in the viewpoint equally relevant – aspect of the political economy of tax incentives: once enacted, vested interests have a particular motivation to keep the incentives in place, and therefore the authors should understand how key actors work from within the institutional framework to seek the outcomes that better suit their interests. The analysis focuses on Dominican Republic, based on official data and additional in-depth interviews with policy makers, entrepreneurs and consultants that assist firms with tax and regulation issues.

Details

Journal of Economic Studies, vol. 44 no. 1
Type: Research Article
ISSN: 0144-3585

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Book part
Publication date: 20 October 2015

Michaele L. Morrow and Timothy J. Rupert

We conduct an experiment asking participants to choose to purchase either a traditional or hybrid car to examine how federal-state conformity of tax incentives impacts the…

Abstract

We conduct an experiment asking participants to choose to purchase either a traditional or hybrid car to examine how federal-state conformity of tax incentives impacts the decisions of taxpayers. We also examine perceptions of taxpayers surrounding federal-state conformity. Consistent with theory related to the effects of information environment and using an experiment in which taxpayers are asked to evaluate tax incentives related to a purchase decision between a traditional and hybrid car, we find that conformity is a significant factor in increasing the propensity to take advantage of the tax incentive. Specifically, we find that participants with simple and conforming federal-state incentives are more likely to take advantage of the tax incentive than with complex and conforming federal-state incentives. In addition, the effects of conformity between federal and state incentives suggest that participant perceptions of the federal system were heavily influenced by the actions of the state.

Details

Advances in Taxation
Type: Book
ISBN: 978-1-78560-277-1

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Article
Publication date: 25 November 2019

Manu Jose, Ruchi Sharma and Madan Dhanora

The purpose of this paper is to examine the impact of research and development (R&D) tax credit scheme on participating firm’s R&D expenditure in Indian manufacturing…

Abstract

Purpose

The purpose of this paper is to examine the impact of research and development (R&D) tax credit scheme on participating firm’s R&D expenditure in Indian manufacturing firms.

Design/methodology/approach

Tobit model is used to estimate the impact of R&D tax credit scheme on R&D expenditure.

Findings

The results suggest that there is a positive and significant effect of R&D tax incentive scheme on R&D. The introduction of the R&D tax credit scheme and the policy amendment are positively influencing R&D investment of the participating firms. However, industry-specific results suggest that these positive results are mainly driven by electronic and pharmaceutical industries. The study reveals that import of technology, import of raw materials, competition, profitability, age and leverage position of the firm also positively influence the R&D intensity of the firm.

Research limitations/implications

The study is limited to the listed manufacturing firms in India.

Practical implications

The study evaluates the innovation policy to help the policymakers in designing an effective policy.

Originality/value

The paper provides evidence on the impact of R&D tax incentive scheme on firm innovation to explain the factors that contribute to the R&D expenditure of the participating firms. It also summarises the effectiveness of tax incentive scheme on different industry groups and firm size.

Details

Journal of Advances in Management Research, vol. 17 no. 3
Type: Research Article
ISSN: 0972-7981

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Article
Publication date: 14 August 2017

Horn-chern Lin and Tao Zeng

This paper aims to examine the design of optimal incentives for a firm’s tax department in the presence of information asymmetry.

Abstract

Purpose

This paper aims to examine the design of optimal incentives for a firm’s tax department in the presence of information asymmetry.

Design/methodology/approach

This paper provides a theoretical model to examine the design of optimal incentives. The focus is on a situation in which a risk-averse tax department has private information about its efficiency type or effort to be exerted before the firm sets the incentive schemes.

Findings

This paper shows that a tax department’s risk aversion leads to a decline in the fraction of the cost borne by the tax department. It also shows that the optimal contract schemes should be designed to filter out as much uncontrollable risk as possible by using third-party information relevant to a tax department’s realized cost.

Social implications

It contributes to a better understanding of the impact of corporate incentive plans on firms’ tax practices. This study, by designing a theoretical model, helps explain why there exist differences in tax planning across firms based on the finding that incentives for tax planning activities differ across firms.

Originality/value

This paper is the first study that considers the situation in which tax managers’ risk-averse and types, as well as relevant information collected by the firms, can be used to set up incentive schemes and investigates whether and how the incentive schemes will be affected when firms improve their prior information by acquiring relevant information before the tax department acts.

Details

Review of Accounting and Finance, vol. 16 no. 3
Type: Research Article
ISSN: 1475-7702

Keywords

Article
Publication date: 1 February 1999

Robert Beale and Howard Davey

Since 1995, the financial reports of New Zealand entities have been legally required to disclose a measure of comprehensive income known as Total Recognised Revenues and…

Abstract

Since 1995, the financial reports of New Zealand entities have been legally required to disclose a measure of comprehensive income known as Total Recognised Revenues and Expenses (TRRE). Financial analysts and members of the Institute of Chartered Accountants of New Zealand were surveyed between 1994 and 1996 to investigate their views on whether TRRE is useful for financial analysis, making economic decisions, and whether it is a useful addition to the financial reports. The findings provided a reasonable level of support for the view that TRRE is useful for financial analysis, such as assessing return on investment. However, there were strong reservations over whether it is useful to use TRRE as a basis for determining remuneration packages for top management, or for predicting cash flows. Overall, there was strong support for the view that TRRE provides information that assists with making economic decisions, and that it is a useful addition to the financial reports.

Details

Asian Review of Accounting, vol. 7 no. 2
Type: Research Article
ISSN: 1321-7348

Article
Publication date: 21 August 2008

Jae‐Young Moon, Won‐Hee Lee, Pyeong‐Rak Choi and Yung‐Ho Suh

This research is to investigate the effect of the improvement of investment environments with investment incentive on Korean national economy by looking into the foreign…

Abstract

This research is to investigate the effect of the improvement of investment environments with investment incentive on Korean national economy by looking into the foreign investment support system in Korea. To this end, first research model was set up based on our literary study and case study was conducted on 150 foreign companies that were located in industrial complex for foreign companies, received the tax benefit and government subsidization. And it was found that even though the foreign companies were contributing to the national economy in general such as in the area of production, export, employment, development of technology, there was no significant contributory difference between the investment incentive beneficiary and non‐beneficiary foreign companies. Therefore it deemed reasonable to reconsider the way Korean government supports foreign companies in Korea and to reinforce foreign companies’ relevance to national policy agenda with additional incentives to foreign companies located in comparatively less developed areas. As a way to promote foreign investment, promotion of investment infra such as improvement of follow‐up services, openness to foreign investment, industrial deregulations in capital area, revitalization of free economic zone, efficient system to promote foreign investment and the reinforcement of public relations were considered necessary, especially the upgrading of economic structure and the integrated management of domestic and foreign investors deemed necessary for the optimal distribution of the industries.

Details

Asian Journal on Quality, vol. 9 no. 2
Type: Research Article
ISSN: 1598-2688

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